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The effect of M&A announcements on the German stock market
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While the effect of M&A announcements is relatively well-studied in some mature M&A markets such as the US, research coverage in the German market is rather thin. The objective of this paper is threefold –we 1) analyse the effect of M&A announcements on the German stock market between 2005 and 2020, 2) attempt to identify if the extent of cooperation measured by the size of participation affects the size of abnormal returns of announcement effects and 3) try to close the existing research gap on the relationship between company age and the number of abnormal returns on the German stock market. Applying an event study methodology to test for abnormal returns we found the market prices adjust within a time window of 2 days to the announcement of M&A transactions. No conclusive evidence for the abuse of private information or the leakage effect was found. For the short event window, a positive correlation between the size of participation and the size of abnormal returns can be identified, however, only showing a low level of statistical significance. The analysis does not find a link between the age of the target companies and the size of abnormal returns. From this result, we can gather that there is insufficient evidence that mature companies bear more potential for synergy effects than start-ups and companies in the early stage of the life cycle.
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M&A Event study Abnormal return Information efficiency